Net salary is the salary that is left after deducting tax and National Insurance contributions . It is received by an employee after the deduction of taxes and other obligations, in other words, it's take-home pay .
We can describe it also as the sum of money you gain at the end of each period after your employer has deducted any charges you are obliged to pay. For example, if your gross salary is 100, you may receive a net salary of 80 after deducting social security payments, insurance premiums, etc.
You may also have to distinguish between net salary before taxes and net salary after taxes. In the latter case, your employer withholds the taxes to pay the tax authorities .
Different Type Of Net Salary
The salary can be divided into :
- only a variable amount (commission and bonuses equivalent to the efficiency of the individual and/or his department);
- only a fixed amount;
- a fixed and variable amount
Additionally, to the three types of salaries discussed above, there are three ways of talking about salaries:
- The Net Salary, which is your "take-home pay" after deducting social security payments, etc.
- The Gross Salary - You can calculate your gross salary by combining your net salary (the amount you receive at the end of each pay period) and any charges you are compelled to pay (social security, insurance, etc.)
- The Total Salary - this is the total amount that you cost your employer. In other words, it is your gross salary plus any other charges that your employer is compelled to pay for you.
Your total salary is higher than your gross salary, because total salary includes the extra amount reflects the charges that are paid by your employer directly to official bodies (social security, retirement, insurance, etc.) on your behalf .
Before payroll checks may be written, the amount due must be measured through the determination of taxes and other deductions. Gross salary is the amount of pay presented before any deductions have been taken out. Deductions are subtracted from the gross salary to estimate the net salary or "take-home" salary (the amount for which the check is written) .
Calculating Net Salary
With the help of tax tables and percentage calculation guides, the administrative dental assistant must calculate the different taxes that are deducted from each employee's pay. Several steps are followed in settling the next salary of each employee. Salary can be calculated in numerous ways.
- Hourly employees are given a salary according to the number of hours worked during a pay period.
- Salaries employees have a set amount they are paid each month, regardless of the number of hours that they worked.
- Contract employees may be paid according to the amount of work they produce or the sum of money they assemble, or by a daily rate.
- Some employees may be paid a base salary with incentives added on the basis of various conditions, such as the amount of money gathered or the level of treatment produced.
It is necessary to understand the different pay levels and how the salaries should be calculated.
Withholding tax is defined by the filing status (married or single) and the number of deductions, stated on the employee's W-4 form. Withholding tax can be divided in two ways. The first way is with the use of a tax table that is given in IRS. Locate the table that illustrates the pay period: daily, weekly, biweekly, semimonthly, or monthly. Afterwards, select the table for the correct filing status (single or married) and establish the gross salary and number of deductions. A Percentage Method of Withholding formula can be used to calculate the amount of withholding tax. That is the second way. The correct table is classified by the payroll period and filing status .
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Author: Monika Mendak